JetBlue Airways Corp (JBLU) 2015 Q1 法說會逐字稿

Good morning.

My name is Lynn.

I will be your conference operator today.

I'd like to welcome everyone to the JetBlue Airways first quarter 2015 earnings conference call.

As a reminder, today's call is being recorded.

At this time all participants are in a listen-only mode.

I would now like to turn the call over to JetBlue's Director of Investor Relations, Kevin Crissey.

Please go ahead.

Thanks, Lynn.

Good morning, everyone and thanks for joining us for our first quarter 2015 earnings call.

Joining us here in New York to discuss our results are Robin Hayes, our President and CEO; Marty St.

George, EVP Commercial and Planning; and Mark Powers, our CFO.

This morning's call includes forward-looking statements about future events.

Actual results may differ materially from those expressed in the forward-looking statements due to many factors, and therefore investors should not place undo reliance on these statements.

For additional information concerning factors that could cause results to differ from our forward-looking statements, please refer to our press release 10-Q, and other reports filed with the SEC.

Also during the course of our call we may discuss several non-GAAP financial measures.

For reconciliation of these non-GAAP measures to GAAP measures, please refer to the tables at the end of our earnings release, a copy of which is available on our website.

Now I'd like to turn the call over to Robin Hayes, JetBlue's President and CEO.

Good morning, everyone, and thank you for joining us.

Earlier today we reported our results for the first quarter 2015.

In the quarter, net income was $137 million or $0.40 per diluted share.

This represents year-over-year net income growth of $130 million.

This strong result would not have been possible without the entire effort of our terrific crew members.

Thank you for all of your hard work, particularly given the very challenging weather conditions this quarter.

Our crew members, 16,500 strong, came together during this season of snowstorms and delays to do everything possible for our customers to help them to arrive safely at their destinations.

I know we have the best, most engaged crew members in the industry, and they are truly inspiring humanity every day supporting our customers.

Total revenues grew 13% year-over-year in the quarter, driven by strong demand, strategic expansion of our network, product enhancements, and excellent work by our revenue management team.

First quarter operating margin improved by more than 13 percentage points to 16.6%.

Lower fuel prices certainly helped these results with our real life average fuel price of $2.06, down 34% versus Quarter 1 2014, but please note, even if fuel prices had held steady at last year's level, our operating margin would have improved about 2 points.

With respect to our network results, all six of our focus cities continue to be profitable and experience year-over-year margin expansion in the quarter.

This is a great result in what is typically the most challenging quarter for JetBlue.

All of our three recent largest network investments, namely Boston, Fort Lauderdale - Hollywood, and Mint, are exceeding expectations even without the impact of lower fuel prices.

Our Boston investment is driving strong returns.

Margin in Boston has expanded three points more than our system average over the last 12 months.

In Fort Lauderdale - Hollywood, our growth has generated even better returns than anticipated.

In fact, over the past year, our margin in Fort Lauderdale has expanded faster than the system average despite twice the capacity growth rate.

And finally, customer response to Mint, our premium experience from New York, JFK, to Los Angeles and San Francisco, has been stronger than expected.

In Quarter 1, (inaudible) on our mid-routes was up over 20% versus last year.

We recently announced Mint seasonal services to Aruba and Barbados from New York JFK starting in November.

With this service, JetBlue becomes the only US carrier to operate regularly scheduled service with lie-flat seating to the region.

We are often asked about other expansion opportunities for Mint.

Although we are not ready to announce anything today, based on Mint's amazing results, we are evaluating additional markets.

Let me now highlight our operational performance.

We faced a string of eight straight named winter storms during the quarter, which hampered operations.

All of our Northeast Blue cities were impacted, but Boston was particularly hard hit, with Boston's Logan Airport breaking snowfall records for the year, and for the month of February.

In fact, more than five feet of snow fell on Logan in February, about 50% more than the next snowiest record on record -- next snowiest February on record.

We had a number of instances where our crew members were personally impacted by the weather, and we are so appreciative of their focus and dedication during these very challenging operational conditions.

With this backdrop we were pleased with our operational performance in the quarter.

We encountered more adverse winter weather in Quarter 1 2015 than Quarter 1 2014, and yet our teams fully improved their year-over-year operational metrics.

On-time departures, or D0, improved 1.8 percentage points year-over-year, to 57.8%, while our system arrival performance, or A14, improved 1.4 percentage points to 71.8%.

During the storm months of January and February JetBlue completed the highest percentage of flights in Boston and New York City of any of our key competitors.

Our operational philosophy and our storm contingency plans were well executed and contributed to our improved net operating income.

I'm extremely proud of the safe and efficient execution of our operating plan during what proved to be a very challenging winter quarter.

Turning to partnerships, as we've talked about in past calls, we continue to deepen our partner relationships, strengthen our relationships at Emirates to not only add service to or focus city in Orlando, but this fall Emirates will be expanding in Boston with a second daily flight to Dubai.

Since Emirates started this route in March 2014, and on the same day JetBlue launched Boston-Detroit service, we've seen traffic from around our network flow through Boston onto Emirates, and other partner networks at a rate well above our expectations.

This new flight to Boston will provide even more opportunities for customers to connect between our two networks.

I'd also like to highlight the impact these types of connections can have on our domestic fares.

As a frame of reference, when we started Boston-Detroit, the average industry nonstop fare paid between the two cities dropped from $266 to $163, a decrease of 39%, and passenger traffic more than doubled.

In closing, we are pleased with our results in the first quarter, but remain focused on executing on the initiatives we've outlined to improve our financial returns.

With that, I'd like to turn the call over to Marty to discuss our revenue results.

Thank you, Robin.

Good morning, everybody, and thanks for joining us.

Demand in the first quarter was strong.

Passenger Unit Revenue, or PRASM, increased 4.5% on capacity growth of 9.6%.

As Robin mentioned, a series of eight named winter storms impacted our operation during the quarter.

We estimate the storms reduced revenue by about $18 million.

PRASM, however, benefited by nearly 2%.

Although we reduced available seat miles, we were able to re-accommodate many of the affected customers.

Thank you to all of our crew members for delivering outstanding service in such trying circumstances.

Looking at our performance on a regional basis, we saw PRASM strength across our system in domestic, Latin America, and Caribbean Markets.

Domestic markets had previously performing well, but Latin American and Caribbean markets recovered nicely in the first quarter due to a combination of competitive capacity reduction and improved warm weather destination and VFR traffic.

We believe the results that we are seeing in the Caribbean provide evidence that patience with our network strategy is being rewarded.

Based on [A4A] data, unit revenue across our combined domestic and Latin networks out-paced the industry by over 5 points in the first quarter.

While we benefited from comparatively less competitor capacity, underlying demand trends across our network were very strong.

I want to give special thanks to our revenue management team who did a truly fantastic job maximizing revenues during the quarter, including leaving fare increases as close-in-demand was particularly robust.

Other revenue decreased 3% year-over-year in the first quarter.

This is not a surprise considering that LiveTV revenues were included last year and not this year.

As a reminder, we sold LiveTV in June of 2014, so other revenue comps remain challenging in the second quarter.

For the sake of modeling, as a reminder, LiveTV revenue was about $16 million in the first quarter of 2014, and $14 million in second quarter of 2014.

Getaways, our vacation package service, had a very strong quarter, with revenue up more than 50% versus 2014.

This is off a relatively small base, but we are very excited about the long-term potential for this business.

As you may remember, Getaways was one of the several initiatives we highlighted at our Investor Day in November.

Getaways revenue increase this quarter was primarily driven by a combination of increased awareness of the Getaways product by our customers, enhancements to our hotel portfolio, and revenue management of non-air margins.

Rate of Fare Families, or what customers will know as Fare Options, we are on schedule to launch Fair Options in the second quarter.

Be calm, their options will provide our customers the choice between three brands of fares, with the first designed for customers who do not plan to check a bag.

By 2017, we expect Fair Options to improve annual operating income by at least $200 million.

Now to Fly-Fi, our high speed broadband Wi-Fi product.

As we mentioned on Investor Day, we expect to fully cover the broadband cost of Wi-Fi in 2015 from content partnership revenue.

We've already announced our content partnership with the Wall Street Journal.

We expect to announce a couple of important new partnerships very soon, so please stay tuned.

With that I'll turn the call over to Mark to provide further details on the quarter.

Thank you, Marty.

Good morning, everyone, thanks for joining us.

This morning we reported record first quarter operating income of $253 million, this is $212 million more than the same quarter last year.

I'd like to join Robin and Marty in recognizing the great job our crew members did this quarter.

We had a very good quarter despite weather challenges.

With respect to revenue, total revenue grew 13% on capacity growth of 9.6%.

Yields improved 3.1% and load factor improved 1.2 percentage points.

With respect to costs, we're very pleased with our progress in the first quarter.

Excluding fuel and profit sharing, year-over-year first quarter unit costs decreased 1.9%.

This is within our January guidance range of negative 1.5 to negative 3.5, despite again winter storm cancellations, which reduced our capacity growth in the quarter by about 2.5 percentage points.

Overall, we estimate winter storms reduced operating income in the quarter by about $10 million.

This is a very good result considering the number and magnitude of the storms.

Winter storm Juno, which hit in late January, was the most financially impactful and represented about a third of the lost operating income.

In the quarter, year-over-year unit cost pressure came from maintenance materials, repairs, depreciation and, of course, storm-related de-icing.

Turning to fuel, in the first quarter 21% of our fuel consumption was hedged using jet fuel swaths and caps, including the impact of fuel hedging and taxes, our fuel price in the first quarter was $2.06, that's down from last year per-gallon price of $3.14 or 34%.

We did not add to our hedge book in the first quarter.

We've hedged about 17% of our expected full year 2015 fuel consumption.

Based on the forward curve as of April 20, we expect our second quarter fuel price per gallon, including again the impact of taxes and hedges, to be approximately $2.11.

Given the volatility in fuel prices, we are not providing an annual fuel estimate, however, as we did last quarter to help you forecast, assuming again the April 20 forward curve on a full-year basis, our all-in fuel price would be $2.12.

For more specific details regarding our hedge positions, please refer to our investor update, which was filed with the FCC and made available on the Investor Relations section of our website prior to the start of today's call.

Moving on to the balance sheet.

We ended the quarter with approximately $1 billion in cash and short-term investments.

During the first quarter we made debt and capital lease payments of approximately $55 million.

Improving our balance sheet remains a priority.

Lower fuel prices are simply accelerating our plans, increasing cash room operations, and allowing us to consider opportunistic debt prepayments.

While we do not buy shares or make debt prepayments in the first quarter, we anticipate, over the full course of the year, we will continue to offset dilution from crew member stock compensation in accordance with our previously announced Stock First Program.

We also expect to closely evaluate debt prepayment options.

With respect to CapEx and the fleet.

JetBlue ended the quarter with 205 aircraft, including 130 A320s, 60 E190s and 15 A321s.

We purchased 2 A321 aircraft in the first quarter with cash, and expect to take deliver of 10 more A321s throughout the remainder of the year, with 3 scheduled to come in the second quarter.

Given the strength of our cash flow from operations, in part, of course, to the lower fuel prices, the current presumption is that we will pay cash for all of our 2015 deliveries.

In the second quarter of 2015 we project total CapEx of $195 million, with $155 million related to aircraft.

For the full year 2015, we continue to forecast non-aircraft CapEx of $150 million to $200 million.

We still expect total CapEx in 2015 of approximately $810 million to $860 million.

Turning to capacity.

We plan to grow ASMs between 5.5% and 7.5% year-over-year in the second quarter.

Our full year capacity guidance remains unchanged at between 7% and 9%.

As we said last quarter, we are not assuming lower fuel prices are here to stay, and therefore we are not adjusting our capacity plans.

Turning to the revenue outlook.

We continue to see solid demand across our network.

We expect passenger RASM to be up between 3% and 4% year-over-year in April.

Although we do not provide quarterly passenger RASM guidance, I would note May and early June are typically shoulder periods for JetBlue.

Moving on to costs.

In the second quarter we expect CASM, excluding fuel and profit sharing, to increase between 1% and 3% year-over-year.

Looking at full year 2015 our guidance is unchanged, and calls for CASM, excluding fuel and profit sharing, to only increase between zero and 2%.

In closing, we're very pleased with our first quarter results.

Our crew members remain highly engaged and we are excited to keep delivering on our plans and improving our returns for 2015 and beyond, and with that we are ready for questions.

Kevin.

Thanks, everyone.

Lynn, we're now ready to take a question-and-answer session from the analysts.

Can you please give us the instructions?

(Operator instructions)

Jamie Baker, JPMorgan.

Good morning, everybody.

Robin, just hoping for an update on your views regarding LaGuardia perimeter.

I've also got mixed responses as to whether 320s and 321s in your configurations can do the westbound year-round without a seat block.

Surprisingly if I ask the question of Boeing I get a different answer than if I ask Airbus.

Have you looked at the operational feasibility yet?

Thanks for the question, Jamie, I'm going to actually ask Marty to answer that one.

Listen, our view on LaGuardia is that we're barely at the bottom of the first inning right now, as far as what shakes out with respect to changes perimeter role.

It's a pretty significant shift in policy.

Yes, our view is that there's a lot of work to be done before we expect to see any change in here, and the Port Authority is to engage all the carriers, not just one carrier, in the community with respect to a change in the policy.

The second issue is that operationally we think LaGuardia is going to be very, very challenged to manage this.

I think one of our competitors has made comments about flying twin aisle wide bodies to this market.

If you think of what the impact of replacing 50 CRJs with 220 seat 767s, I don't think the airport is ready to handle that.

And the third issue is, it certainly creates an interesting competitive balance within metropolitan New York, and I think there's an area where we want to be talking about things like stock quant investitures, to make sure that we maintain a competitive marketplace.

And second, turning to fuel efficiency, I'm not sure what metric you use internally, we tend to just look at ASMs per gallon because it's easy.

There was no major change in the first quarter, nor does the Q2 guide suggest there will be.

Dentification, as I recall, is a, on the 320s is a 2016 event.

I'm just trying to think if there are any drivers in deliveries or network issues next year that would drive any improvement in fuel efficiency, or is 2016 the year where we see the big increase?

That's a good question.

It's Mark, Jamie.

Obviously bringing in 10 or so airplanes is a good thing.

We haven't changed the average stage length so that's not driving it.

I think a big jump in fuel efficiency is, not to over state it, but with the delivery in 2018 of the NEO.

Okay, helpful.

And just because the line was breaking up, we heard the April RASM guide.

What was your comment on May and June?

We didn't comment on May and June.

Here's what I'd say about May and June, first of all, back to the point Mark made earlier is, they are more shoulder months for us.

(Multiple speakers) a lot of peace in it.

I will say this much, we didn't really give any direct guidance, but we're viewing RASM as being modestly positive in both those months.

Dan McKenzie, Buckingham Capital.

Thanks for the time here.

First question is I'm wondering what the IT limitations for allowing connecting itineraries between the non-Mint and the Mint flights might be.

It appears that folks in Boston can connect on the Mint, but folks elsewhere in the Northeast cannot, so I guess it just seems from kind of the outside looking in that JetBlue is leaving a lot of revenue demand on the table.

I just wonder why it doesn't make sense to have folks elsewhere across the system compete for that local traveler in New York.

Hi Dan, it's Marty, thanks for that, I think thanks for that.

Here's what I'll say.

The process that we went through on the current platform has meant that we are a couple -- there are certain destinations we cannot offer Mint connections on because of the stable limitations with our website.

When we bring our next platform on with Datalex, that will be completely different, and we're very optimistic about all merchandising capabilities with Datalex, including full connectivity.

The Datalex platform coming onboard again, is that second quarter?

Yes.

Okay.

And I guess just following up, is the better balance sheet a priority.

I see the principal payments that you're planning on here, but how much debt are you thinking that you'd want to prepay this year, in addition to the principal debt coming due?

Well we're looking opportunistically, I won't give a number, but certainly by the next quarter or so we've certainly had some plans.

A lot of them require some negotiations so I don't want to play my hand too much on that.

Michael Linenberg, Deutsche Bank.

Hi, everyone.

This is actually Rita in for Mike.

Thanks for the time.

First, I was curious to hear more about your new credit card agreement with Barclays, and your decision to choose Barclays over AmEx.

I would think that has positive implications for your financials, but I was hoping you could maybe help us frame the potential benefit from balance sheet, cash flow and/or income statement perspective?

Thanks.

Here's what I'll say first of all, our contract with American Express ends December 31 of this year, we did go for a RNP process.

We have not actually announced who our partner will be, but I will say we will be operating under a different contract in 2016.

We did give guidance in Investor Day as far as the benefit we see from that.

It's significantly better economics than we have today.

We're really excited about it, but I can't give anymore guidance beyond what we said on Investor Day.

Okay, fair enough.

Mark, a follow-up on the question about prepaying debt.

Can you help us maybe size up any potential interest expense savings, your targeting, or could generate from the move you plan to make this year?

No, I can't really, but I would highlight Jim letting his team -- this quarter we saved $3 million of interest expense by virtue of prior debt prepayments.

Okay.

Well then that's it for me.

Thank you.

Hunter Keay, Wolfe Research.

Thanks, everybody, and good morning.

That PRASM guide for April was remarkably better than I think a lot of people were talking about, I think people were thinking you guys might be down high single digits because of the comp alone.

Can you help us get some more color?

Obviously it's not Fare Families, that hasn't started yet, so can you help give us more color by maybe geography?

I know you said Mint RASM is up 20%, but what kind of contribution is that driving?

How much of this may be competitive capacity?

Tailwinds they may be seeing in the Caribbean.

Can you help us flush out anymore color on what's driving that so we can sort of think about the sustainability?

Thanks a lot.

Hi, Hunter, it's Marty.

Here's what I would say.

First of all, we saw strength across the network, and with respect to competitive capacity, it comes and goes by region, I don't think that's really a big driver.

Honestly, I think the biggest driver, specifically for April was that a little bit unusual for the Northeast, we had a pretty elongated school holiday period.

We had school holidays starting really the last week of March and going all the way to the third week of April in the tri-state area around New York.

These are time periods where historically when they've been concentrated in one week, we've had almost infinite demand.

So the ability to be able to spread that demand across three or four weeks has been very leverage for us, I think that has been very positive for us in April.

Okay, thanks, Marty.

Another one for you, too, I guess.

You mentioned WestJet by name at your analyst day, some of their implemented Datalex and rolled out their own sort of version of the Fare Families and that roll didn't go very well initially.

I think there was some communication problems, and there was some issues they had with their employees understanding what the product was and how they're trying to do it.

Is there anything you've learned from those guys that you might be sort of able to leverage in your own rollout?

Are you going to do this cautiously?

What can you take from what didn't work there to what you guys can make work for you?

Thanks for the time.

Well I'm not going to comment on WestJet's implementation, whether it's good or bad.

What I will say is, we are fixated on making sure that the rollout of Fare Options for our crew members is going to be something they're very well trained on and they fully understand.

The training has already begun and it's going to continue right up until launch date later on this quarter.

We're very optimistic that we've designed a system that's going to be simple, simple for crew members, simple for customers, and also creative.

Listen, my view is you can never train enough, you can never prepare enough, but I think we're doing about as much as we can.

Thanks, Marty.

Duane Pfennigwerth, Evercore ISI.

Good morning, thanks.

Just a question on profit sharing, it looks like you're accruing at maybe a higher level.

Was there anything specific about the first quarter, or if we're to assume a similar level of profitability or margins that we saw in the first quarter, would we expect to see that sort of run rate going forward?

Hi Duane, we have not changed the profiteering methodology or calculation methodology at all.

So, I mean, obviously profiteering logically should be higher, in a higher margin environment, but we haven't made any changes to the program.

I believe, in fact, it may be described again in the 10-Q that's coming out, the methodology, and if you have other questions, obviously Kevin is ready to take any questions you may have later.

All right.

That's helpful.

I guess as a percent of your pretax income, it certainly is at a higher level because we haven't seen margins like this in a while.

And then just on Fare Families, can you give any finer point on when you would expect that to launch?

What percent of your customers might actually be facing a bag fee, and then just logically, if you flip the switch sometime in 2Q, when that would actually contribute.

Is it a 3Q or 4Q dynamic more than a 2Q dynamic?

Thanks.

Thanks, Duane.

We're still on track to launch in second quarter.

Obviously on day one, there's very few customers who are going to be given the option to purchase under the Fare Options Program, and as time goes forward in the booking curve we'll see more and more, but we're not prepared to give anymore guidance besides that.

Okay.

Helane Becker, Cowen.

Thanks very much operator.

Hi guys, thank you very much for the time.

I think during the prepared remarks you talked about three of your markets having better than expected, or better than, I guess, your system average margins, right?

So can you say which regions may be underperforming, and if you can't say specifically the regions, can you just talk about things that you're doing to improve the margins, and what you would consider to be underperforming regions?

Thanks.

Hi Helane, here's what I would say.

You know, if you look at the top level results we produced this quarter, everything got better.

Obviously with the impact of fuel and a strong demand environment, we're very happy with what we're seeing.

The experience we go through of tweaking the markets is normal course of business for us.

I mean we're constantly moving ASMs around based on opportunities where we see more demand, or maybe opportunities to shift capacity.

You notice we're not changing our guidance for this year.

I think that the best way for us to continue to improve margin in the network, with respect to deployment, is to move ASMs around opportunistically.

Which the beauty for us is we have a very well diversified network.

We've got several large focus cities, we've got six focus cities around North America.

We're very happy to have this opportunities to move capacity around.

I think Helane, if I could just build on that, I think the point we were trying to make in calling out those three investments, were, if you -- in terms of what we've talked about over the last few years, how significant networking investments where we fielded questions around if this growth accretive to earnings.

I think what we're demonstrating both in Boston and Fort Lauderdale-Hollywood, which have been to allow high growth markets, is that they are not only growing quicker than anywhere else, but they are -- the margins we're seeing are growing quicker than anywhere else, and I think that's the point that we were trying to make.

We're certainly not calling them out and saying that others aren't performing to the degree we expect them to.

Okay, fair enough.

Thank you for that clarification.

I just have one followup, Robin.

Since you actually specifically mentioned Emirates, I know they connect a lot of passengers over JFK to Orlando, and now they're going to do their own nonstop to Orlando.

So maybe a two-part question.

One is, is there an opportunity for you to take Orlando passengers to Mexico and elsewhere, or is that more of an OMT market, because I think you fly south from Orlando on some days.

And then are you concerned about passengers over JFK who won't be on your system anymore?

Thanks, Helane.

Certainly to your question around Orlando, absolutely.

Specifically, we don't fly to Mexico City, yet, but it's something we are working actively on, but yes, we would expect connecting traffic to feed from Emirates in to the JetBlue network out into Orlando.

And in terms of are we concerned about losing traffic between JFK and Orlando, no, not at all.

There is plenty of other demand for a market like that where we're already so strong.

So I think all together, what I didn't mention is the out-gaging of capacity into JFK on Emirates, as well.

I think all of those will feed more growth and more customers in to the JetBlue network.

Great.

Thank you so much.

I appreciate the help.

Andrew Didora, Bank of America.

Hi, good morning, everyone.

Thanks for the questions here.

Just on the unit cost performance in 1Q, I obviously thought those were very encouraging, but I do see there's a step-up in terms of growth from 1Q into 2Q.

Is that due to timing of certain costs, or is there something else in there we should be aware of?

There's a little bit of that but it's nothing terribly exotic.

We did, obviously one of the nice things about the storms, if you will, is some of the maintenance gets pushed off because of the hours and cycles you're not burning, so they'll be a little blip on the maintenance side, but nothing significant beyond that.

Okay, and then just Mark, I know you mentioned in your prepared remarks, no change to the hedge book in 1Q.

Should we read this as any sort of shift in your hedging strategy?

Do you plan on layering in more hedges in this environment for the back half of 2015 and heading in to 2016 here?

It's hard to say, and the reason why you say that is our policy is essentially to -- we obviously look at what our competitors are doing.

We also look at the environment.

We are not -- and I think it's very important as well, we do not place any hedges in the first quarter, we have not abandoned the hedge program itself.

We fully intend to keep our options open.

And I should come back to your CASM.

We are still -- we go back to our Investor Day commitment of the below 2%.

We plan on managing that not only next quarter but the full year and staying within that guidance that we provided you in November.

Great.

Thank you very much.

Savi Syth, Raymond James.

Good morning.

Mark, a question for you.

I know there's noise around the quarters, but could you remind me again, just what maintenance and labor cost growth are there on a unit basis or overall should be trending in 2015-2016?

I don't think actually we've provided that level of granularity.

I think if we go back to Investor Day we did note that MMR reflects the aging of the fleet.

We've actively addressed it through a lot of flight hour types of agreements, and we continue on that track, but I don't believe that we have gotten as granular as providing sort of the breakout of the various components of our CASM guidance.

Should it be similar to 2015 in 2016?

Is there something that's off about either of those years?

No, you'll have to -- just have to base on the overall cost guidance that we've provided, but I really don't want to start to get in to line item by line item.

Sure.

That will be a long day.

Sure.

And maybe, Mark, then, on that side, does keeping it within the zero to 2%, does that take in to account maybe the cost related to the cabin refresh that will be going on in 2016?

Sure does.

Okay, great.

And then just a question, followup on the Mint side.

What's the fare trend on the non-Mint experience fares?

I'm just trying to get a sense of is it kind of the non-Mint fares declining and being fully offset by kind of the Mint fares?

What's driving that program?

Savi, excuse me, core prices in the Transcon are set with the market.

Honestly I think we've seen -- we've said we've seen some good strength in all of Transcon this quarter, not just in our net markets.

There's really, there's no -- we have no significant change in strategy for our core pricing.

We do have a change in strategy for our Mint pricing with the industry, I mean our goal was to go in there and lower fares significantly, which we have done, and I think that's been part of what's made Mint so successful.

Helpful.

Thank you.

Tom Kim, Goldman Sachs.

Hi, thank you.

I wanted to ask about head count.

Is it possible to break out some of the curves in terms of FTs prior quarter, and what you think staffing requirements would be for the remainder of the year?

I actually don't know the specifics of that.

I would say our FTs has been growing slower than ASMs by about 2% overall, and beyond that I don't really have much more.

Clearly you don't deliver the cost performance for delivering by massively ramping up, so it's a big element of cost and consistent with our CASM execution, we're pretty tight on that.

For other details though, I think, Kevin, you might circle that.

Actually, Tom, I'll get back to you with the details.

Great, that's helpful.

Then just with regard to the increase maintenance, you alluded to the fact that storms impacted that.

I'm wondering, can you give us a sense of what a good run rate to assume for maintenance crew is, or at least breakout maybe what the storm impact was?

Again, if you are converting to a flight hour type of agreements, and you're taking 2.5% ASMs out of your system because of storms, you're going to have that savings just in terms of the hourly because you're not accumulating the hours.

So that may be the only sort of good news relays to a storm.

Obviously, the better news is despite the storms, operating performance really excelled this year, but I don't think we want to get in to sort of the details of maintenance, other than, again, while we are taking 10 or 12 airplanes a year with presumably a maintenance honeymoon, the fleet is getting older and you should expect sort of year-over-year core maintenance would increase even with flight hour types of agreements.

My last question, Mark, specifically with the fuel hedging side, can you give us a sense of where the upper and lower boundaries are?

At what point does -- to what point, or to what extent, are you participating with lower fuel prices?

At what stage does price start to actually negatively impact and result in hedge losses?

Oh, we're so far away from that.

It's really nice to be positioned where we are.

If you look at the investor update, which we filed earlier today, we were 20% hedge this quarter and the price levels are described in the update, and then moving forward we're in the 14% or 17% in the quarters ahead, so we're participating on the other side of 2014 or 2015 to a great extent in the current fuel environment.

I should note that we enjoy the position that we didn't have to buy our way in to that position or buy out of hedges, but this was basically the hedge book we had at the start of the year.

So we've had full enjoyment, or nearly complete enjoyment of the lower prices.

Again, the prices themselves are set forth in the investor update if you want to get a little more details by quarter.

Thanks, Mark.

Joe DeNardi, Stifel.

Thanks, good morning.

So Robin, I appreciate the commentary around not adjusting your capacity in light of lower fuel prices, but maybe given how strong the revenue performance has been, how does that impact the way that you think about capacity going forward?

Is there a bias toward growing more or growing less, if not this year, into next year?

No, I will repeat the comments made on the last quarter.

We are -- we still want to run this company for a much higher fuel price.

That definitely means that we don't want to just add a flight out-of-market, and then six to nine months be looking at that and saying fuel is not working anymore.

So we're just planning extremely cautiously.

We have a lot of initiative in front of us, we have Fare Options, which you know about, we have the fee dentification and the refresh of the 320 cabin into next year, and we're just very focused right now on executing those initiatives.

Okay, and then with regards to Mint and the new markets you're exploring there, would you care to characterize what type of markets they are?

Is it more of a business market, or leisure, like what you're doing in Aruba and Barbados?

Well, I think you've heard me and others say before that one of the surprises with Mint was how well we've done with a sort of corporate market.

I mean, when we built the product for JFK, LA from JFK, San Francisco, we really had the leisure traveler and sort of small, medium size corporate in mind, but we've been plenty surprised how much business we've been getting from larger corporates.

On many, many days these flights are sold out days ahead, and so we've been pleased by that.

You've heard me mention things like Boston-LAX, Boston-San Francisco before, I mean, that's the type of market we're looking at, but we haven't made any final decisions yet.

Once we have, we'll come in and make sure that's communicated out.

Okay, and then the April revenue commentary, want to clarify.

Was that PRASM or TRASM?

PRASM.

Thank you.

Michael Derchin, Sterne Agee CRT

Hey, guys.

Great start to the year.

I remember not too long ago when your first quarter results were full year results, so this is incredible.

(Laughter)

Most of my questions have been answered.

Can you share any light on the competitive capacity outlook for the second and third quarters?

You said it was pretty favorable in the first quarter.

How's it looking in the second and third quarters?

Hi, Michael.

It's really no dramatic change quarter by quarter.

I think the competitive environment we see right now looks like it's holding throughout the rest of the year, but again, it ebbs and flows, I mean ASMs come in, ASMs go out.

We're more focused on just executing the plan as we've laid it out.

And just going back to kind of evaluating Mint's expansion, there's -- Aruba and Barbados are obviously north-south markets.

Have you thought about north-south markets, because there certainly is, may not be a corporate demand, but there's certainly wealthy individual VFR kind of demand for that product on some longer hold north-south markets as well.

Yes, we're looking at all of that.

When we have news, Michael, we'll be very excited to share it.

We've been absolutely ecstatic how well Mint has performed.

Couple years ago when we stood up at Investor Day and sort of talked about the RASM gap we were seeing on Transcon, the ability for us to effectively plug that and create a product that really we got back to our roots and got back to our mission of inspiring humanity, creating a product which custom fares and offered a better experience than our competitors, that's just what the core JetBlue DNA is all about.

We think there are a lot more places where Mint could be successful.

Thanks very much.

Duane Pfennigwerth, Evercore ISI.

Thanks for taking the follow-ups.

As we think about sort of upside for Mint and where can it go from here, can you comment on the average paid fare so far, or maybe in the first quarter?

We see a lot of price points out there at $599.

Is that kind of representative of the fares you're realizing?

Duane, I'm not going to give a specific fare performance for Mint, but I will say this much, we have gone through two rounds of fare increases in Mint based on the demand we're seeing.

Back to the comment that Robin made a few questions ago, we have several flights in the market that are sold out several days before departure.

Obviously you look at a situation like that, you immediately think about opportunities to increase price to create more availability, because fundamentally, selling a flight out a week, four, five days out doesn't do anyone any good.

With respect to the pricing though, we said from the beginning, and I want to reiterate, we have no aspirations to go back toward the legacy pricing model.

JetBlue is all about providing lower fares for customers.

This is a market where you'll routinely pay $2200, $2500 each way, we don't see that in our radar at all.

With respect to the $599s, we are still selling some fares at $599, there's no question.

There are some flights you have a lot of trouble getting that, there are some flights you can get that pretty regularly.

This is normal blocking, tackling for the revenue management team.

I'm actually very happy with how well the revenue management team has done in looking at this market.

This was really unknown territory for us, and I think they've been very, very reactive and forward-looking as far as how to best manage the Mint revenue management.

That's helpful color.

And just lastly, if I could end on a network question, I'm just looking at your investor update here and some of the new routes.

Can you give us some of your thought process, Marty, on a market like Baltimore-Fort Lauderdale, where I think Southwest has about 10 flights per day.

What do you see as the opportunity on a new route like that?

Duane, that's a great question.

I'm very excited about Baltimore-Fort Lauderdale for a couple reasons.

First of all, we're having good success in our Baltimore-Boston route, second thing is we're building a very large operation in Fort Lauderdale-Hollywood, not just for domestic customers but also for connecting customers into Latin America and the Caribbean.

And the third thing I'll say is that if you were to pull head-to-head RASM of JetBlue versus Southwest, we compete very, very well with Southwest.

Not for nothing, I probably don't have to remind a lot of you on the call, but we still do offer the best product of any economy cabin in North America, and customers respond to it extremely well.

We compete very well against Southwest and I'm looking forward to that market.

Thank you.

Thanks, everyone, that concludes our first quarter 2015 conference call.

We look forward to talking to you again soon.

Thank you.

And again, that will conclude today's conference.

Thank you all for your participation.